Jeff Standridge:
Hey guys, welcome to another episode of the Innovation Junkies Podcast. I’m Jeff Standridge.
Jeff Amerine:
And this is Jeff Amerine, glad to be back.
Jeff Standridge:
Hey man. How are you?
Jeff Amerine:
You know, hanging in there excited to, uh, to talk about this interesting economic environment we’re in and what that means as far as innovators and leaders and some of the enterprises and organizations we see.
Jeff Standridge:
Yeah. So we, you know, we spend a lot of our time focused on helping organizations achieve sustainable strategic growth, sustained strategic growth rather. And we do that through our podcasts. We do that through our coaching engagement, through our consulting engagements, through a lot of our social media posts and our, and our writing and, and speaking and what have you. But, but here’s an interesting scenario today where you just talked about another fortune, fortune 10, you know, first, certainly a fortune 100 company announcing layoffs, um, and spending cutbacks and spending and, and what have you.
And so how do we, how do we help our listeners think through – what we’re going to talk about today is how do we help our listeners think through the concept of, all right, you’ve been pushing me to strategically grow, strategically grow, strategically grow. Now I’m facing economic uncertainties and I’ve got a cutback spending. How do I think through those spending cuts in a manner that doesn’t gut the organization or doesn’t gut my strategic growth engine.
Jeff Amerine:
Yeah, I mean, it’s excellent. It’s where you teed up the point there in a really solid way. And to even paint more of a picture, although I think most people are probably aware of it, you’ve got rising interest rates, which means your cost of capital is higher, you’ve got a slowing economy by any measure, and yet we still have the lowest participation rate in 50 years. So you can’t necessarily find the key talent that you might need.
And we’re seeing demand slowing. One of the consequences of higher prices is they eventually cure higher prices by reducing demand. So if you’re in an organization, whether you’re a B2C organization, selling to consumers or whether you’re selling to other enterprises, it puts a lot of stress on the senior leadership to figure out what to do, how to react to that and what are some, what are some techniques and things you’ve seen done in the past?
Jeff Standridge:
Well, I can, I can tell you what I’ve seen done in the past that I’m not certain what I’m pretty certain are not the right techniques is, um, you know, I have long said that a mass layoff is a, is an indictment on every leader who has responsibilities for hiring and firing and workforce management. An across the board, spread the peanut butter, we’re cutting 10% of our workforce, 12% of our workforce is an indictment on everyone who has the responsibility for their workforce, because we should be right sizing our workforce on a daily, weekly, monthly basis based upon the, if we lose a big client, then we can’t carry the team that service that client until we get another one. You know, if, if, if the revenue is coming in lower than expectation, we need to relook at our workforce. And that doesn’t mean go fire three people tomorrow, but it could mean we’re not going to back – we’re going to put a freeze on it. We’re not going to backfill any new positions.
So using just in time, and I use that word a lot, but making decisions just in time to manage your workforce based upon the clients and the revenue that’s coming in the door and not being afraid. You know, I, when I say a mass layoff is an, is an indictment I’m talking about, as I said, an across the board, peanut butter, I’m not talking about reducing positions when you lose a client or when the revenue comes in below expectation and it’s going to continue coming in below expectation it looks like. I’m talking about making decisions in the moment. That’s what good leaders, good business managers do. And so that’s something that I think is tantamount to what we shouldn’t do is resort to mass layoffs when we absolutely can’t stand it anymore.
Jeff Amerine:
Sure. Well, and some things to think about that as well is first of all, it’s a business cycle even though we’ve had this kind of unusually long period of growth since the financial crisis, it’s still a cycle. You’re always going to have elements of boom and bust. Prior to getting to that bust side, the best leaders are thinking, where do I have account concentration? And that’s the risk. And what do I do about that account concentration? Particularly if I’ve got a large client that might be arbitrary and capricious in their own right about changing their mix of business and eliminating the product or service that I’m selling to them. So that’s kind of one point. Always aware of those single point failures, large account concentration opportunities that are out there.
And I think the second thing is, and I think most organizations are getting this, but having this sort of flexible approach to you have a core of W2 employees and team members that you need and you have flex staff that on their own accord has kind of built a portfolio of activities that they’re involved with that brings some domain, domain knowledge and expertise that can help you continue to be innovative, meet project needs, et cetera. But you’re not beholden to them. You can, you can reduce them more easily and not feel bad about it because you haven’t fired a full-time employee. It’s someone that is here on a project basis that has lots of projects, with lots of employers and they’ve spread their own risk across more than one company. I think those are some good ways of approaching the flexibility you need.
Jeff Standridge:
Yeah, I think you’re right. This concept of a contingent workforce that’s contingent upon demand. Um, and, and they, you haven’t agreed with you pay a little more per hour for them or for per work unit for them. Uh, but you, what you’re paying for is the flexibility to be able to scale them up or scale them down when the need arises. Uh, and, and I think there are, you know, there are not enough companies. So, so if you, if you don’t have a good quality contingent workforce, and it’s not part of your ongoing strategy, then you get into a situation that hospitals have gotten into over the course of the last two or three years where they’ve been paying five, seven, 10X for travel nurses or for travel personnel who are flying in from all over the country for three month assignments. And they’re spending millions and millions and millions of dollars above their payroll budget because they didn’t have a contingent workforce strategy in the first place and they had to create one when the prices were at the maximum.
You know, I think it really, so I think those are great examples of some things to do. I think it really comes back to what’s your plan? What’s your strategic growth plan? What does your strategy look like? Because if you don’t have a plan, then how are you going to know whether or not you’re making strategic or counter strategic expense reductions? And so if, if your strategic growth plan says that you’re going to plan a flag in a new direction or in a new geography or in a new, you know, you might make a decision to not do that for the current time, but you’re making it with your eyes wide open that you are delaying a strategic decision that you’ve made previously. But you might say, no, that’s still important to us. So therefore, in order to enable that strategic beachhead to be established as we had planned, what other expenses do I need to reduce that won’t slow my ability or hamper my ability to achieve that strategic beachhead. And so I have to look at my plan and what is it that I said I needed to accomplish over the next three years, 12 months, 90 days, and first of all, look at expense reductions that won’t hamper my ability to achieve those strategic outcomes.
Jeff Amerine:
No, it’s great. I mean, a couple of real world examples, I was on a call earlier today with someone that works for a very large company, a multinational software company, one that you would think their gross margins are such that they print money. And he said, yeah, for the foreseeable future, any non-essential travel has been canceled. So if it’s not core to the business, if it’s a nice to attend conference or seminar or whatever, that’s not happening unless it’s really something that’s exceptional and therefore you need approval and you don’t want to micromanage, but if you’re really trying to do cost control at the corporate level, some of these things that are typically normal course of business when times are great, you scrutinize them.
And then the thing I would say take from that is, and we learned some of this during the pandemic, do you really ever need to go to some of those things? If they didn’t result in an ROI or return or brand enhancement or something that led to sales or the growth of the company, maybe you never really needed to go. And some of the things that are characteristic that we’re seeing, the trade show business is changing remarkably, because people realize that’s largely a waste of time. And so these are other things, whereas an executive, you apply that lean mindset and the Deming kind of mindset that says, is this gonna add value to our customers? Is it gonna add value to our team members? And is it gonna add value to our shareholders?
If it’s not true on one or more of those, you probably don’t need to be doing it. And so I think, I think that’s, that’s actually really good mindset to take into any economic situation.
Jeff Standridge:
Yeah, I inherited a group within a publicly traded company several years ago, and there was an industry trade show that, that every sales person on my team wanted to go to, well, you take that and you got, uh, 60 people, uh, 30 people on the direct side and 30 people on the partner reseller side or indirect side. So I’ve got 60 people going to Chicago, New York, San Francisco, wherever, for this conference every single year. And first thing I did was said, okay, here’s the deal. In order to get approval to buy your ticket, I need you to submit to me the list of clients or prospects with whom you’re going to meet while you’re there. And so they had to schedule their meetings before they could even buy their ticket. Well, guess what? We immediately went down from 60 down to 20 people who attended that meeting. Right. And so to your point, you know, what, what are the, what’s the ROI? What are the key outcomes that are expected of that event?
And then what are you looking at on the back end to make sure that they actually had those meetings and that there were actually opportunities being put in the pipeline from those from those meetings or or opportunities that were being advanced in the pipeline.
Jeff Amerine:
Another example, and this one is not without controversy, but I’ll say it just because it’s one that most people see in the news. So Elon Musk buys Twitter, regardless of what you think about that and his approach to it, and he reduces the workforce in a real massive way. And you don’t notice any difference as a business customer or user of that platform in the before and after, other than maybe, you know, he’s got some different policies.
But it hasn’t ceased to exist. The thing isn’t down, it hasn’t failed. And so it makes you think, why did we need all those people and what were they doing before? Now the tragedy in all that was that somebody thought they needed all those people. And now those people have had to go out and find other jobs, which is a failure of leadership. So figuring out how to do things with a lean leadership, absolutely essential people and being efficient in not wasting their time in a bunch of non-value added activities. I think that’s also a key part of going into a difficult economy.
Jeff Standridge:
Yeah. So, so I’ve heard three things here today so far is number one, don’t wait until you have to have a massive layoff to do the right thing around managing the expenses and the workforce and everything. And in many, many companies, the largest expense is the workforce, right? In terms of actual money out the door, we can talk about, well, it’s not an expense and it’s an investment. And I agree with all of that, but it’s cash out the door, right? So number one, don’t wait until a financial crisis to make the right decisions about your workforce, your expenses. Number two, start with your plan. What’s your strategic plan and where are you committed to advancing that strategic plan, even in the face of expense reductions and figure out ways to reduce expenses that don’t sacrifice the plan. And then the third thing you said was relying on our good friend, W. Edward Deming, who said, let’s look at things that don’t add value to the customer, to our employees or to our shareholders, to our customers.
to our employees, to our shareholders. If it’s not going to add value, demonstrable value that we can identify to one or more of those customer, employer, or shareholders, then that’s where we need to look at potentially making cuts.
Jeff Amerine:
That’s good stuff, Jeff.
Jeff Standridge:
Hey guys, we appreciate you for joining the Innovation Junkies Podcast. Uh, this is our last episode of this season. We’re going to be taking a little bit of time, uh, during the summer. Uh, Jeff, I know you’re going to be doing a little bit of traveling. I’m going to be spending some time with a, with a relatively new grandbaby. Uh, we’re going to be getting our thoughts together regarding, uh, our next season of episodes as well.
Jeff Amerine:
And please take advantage of everything you’ve seen this season and past episodes. A lot of good learning there and we’ll look forward to seeing you all in August.
Jeff Standridge
Check us out at innovationjunkie.com. That’s innovationjunkie.com. We’ll see you next time.